A Nigerian Model for Stakeholder Capitalism
by Ndubuisi Ekekwe
Harvard Business Review
Summary: The Igbos in Africa has been practicing for centuries what is today known as stakeholder capitalism. The Igbo…more
For centuries, the Southeastern region of Nigeria has practiced what is known today as stakeholder capitalism — a construct that businesses must elevate the interests of communities, workers, consumers, and the environment alongside those of shareholders. The Igbos, the predominant ethnic group in the region, are known for the Igbo apprenticeship system (IAS), a communal enterprising framework where successful businesses develop others, and over time provide capital and give away their customers to the new businesses. The implication is that few businesses grow to become very dominant, since they keep relinquishing market share, and in doing so, they accomplish one thing: a largely equal community where everyone has opportunities, no matter how small.
As the world explores how to institutionalize stakeholder capitalism — to implement more inclusive, just, and equitable economic systems that work for all, not just a few — we should consider the tenet and the spirit of the Igbo apprenticeship system. The IAS has demonstrated that markets could deepen management accountability, competitiveness, and profitability, while at the same time, anchoring shared prosperity. The result is that communities experience inclusive growth with empowered workers and customers helping firms deliver sustainable fiduciary results. In other words, creating value for all stakeholders — investors, workers, customers, communities, and the environment — is not a zero-sum game; empowered stakeholders empower markets of the future.
The IAS has been recognized as the largest business incubator in the world as thousands of ventures are developed and established yearly through it. Innocent Chukwuma, the founder of Innoson Motors, the largest indigenous automobile manufacturing company by sales in Africa, is a product of IAS. So is Ifeanyi Ubah, the owner of one of the largest private fuel depots in Africa, Capital Oil & Gas, which has the biggest private oil jetty in Nigeria, an 18-ARM loading gantry, ocean-going vessels, a storage facility of over 200 million liters, and hundreds of distribution tankers. Cosmas Maduka, who controls Coscharis Group, a conglomerate with diverse interest in manufacturing, automobiles, and petrochemicals, also passed through the system. Unlike Ubah and Chukwuma, who finished primary education but dropped out at the secondary level, Maduka did not finish primary school. Until recently, that was typical; education has instead been the apprenticeship model, where an individual learns the mechanics of markets and business secrets under a master.
At the core of it, the IAS is a business philosophy of shared prosperity where participants co-opetitively participate to attain economic equilibrium. Accumulated market competitive advantages are constantly weighted and calibrated out, via dilution and surrendering of market share, enabling social resilience and the formation of livable communities. These are engineered by major participants funding their competitors, where success is measured based on support offered to others to thrive, and not by absolute market dominance. For centuries in the Igbo nation, they have kept this culture alive by reminding everyone of a popular saying, “onye aghala nwanne ya,” which means, “none should leave his or her brethren behind,” in the communities and in the markets.
The key focus of IAS is to prevent poverty by mass scaling opportunities for everyone. Igbos believe that when a child is born, he or she belongs to the community. (In fact, Igbos name their children “Nwaoha,” which means “a child of the community.”) Parents bring the children into the world; communities ensure the children succeed and thrive. If anything happens to the parents or they are incapable of raising the child, someone else in the community will step in. Typically, through the apprenticeship system, the child goes through a process of living with a new family, and then over time will transition to working in the master’s business. After a few years, he or she is “settled”; the master willingly relinquishes market share by providing customers, funding to an obvious future competitor, and other things necessary for the mentee to have a thriving venture, with no equity in the new business.
In a very practical sense, you have a scenario where a man, trading in a city, returns to his village, picks three children (usually boys), who might have lost their fathers or the families are too poor to train them, and decides to ensure they have meaningful lives. Those children serve him for some years — a period of apprenticeship — and upon completion, he invites his kinsmen, business partners, and others as he “settles” them. If he was holding a 10% market share in that specific market, by the time he is done, he might be holding only 7%, releasing 3% to the boys. For him, the growth of his company is not what matters; it is that the apprentices do well. But he doesn’t stop there. He sends them business opportunities, making sure they can thrive independently. In some cases, the masters may exit the sector entirely, in order to allow the others to thrive. Ubah, for instance, built a spare parts business in Ghana and Congo, but went back to his native town in Nnewi (Nigeria), brought in young people, and trained them in the business. Over time, he eventually left the sector for them. Chukwuma did the same with his prior manufacturing ventures.
As the world discusses inequalities with the push on stakeholder capitalism, the IAS has handled the equality part for centuries, making the Igbo nation a relative stable community in Nigeria. While Nigeria has average literacy rate of 62%, most states within the IAS record excess of 90%. In addition, the IAS is structured to ensure that everyone has opportunity and support, and by doing that, it prevents extreme poverty and inequalities in communities. The implication is that largely equal communities have improved educational attainment and created stable societies.
Looking at the IAS from a pure shareholder-centric capitalistic mindset, the system may seem defective — until one realizes that the shareholder here is the whole community, and through this model, most Igbo communities have built collective wealth. The Igbos came out of the Biafra war, in 1970, with their assets largely frozen and with little to begin post-war lives. Many Igbo communities started community leagues to build schools and clinics, and elders pushed men to share opportunities to help their brethren. Over decades, that spirit has resulted in enduring economic wealth.
That said, many have noted that the Igbo apprenticeship system could be reformed to provide better protection to the young people who become apprentices to mitigate any abuse from their masters. Having a registry for contracts administered by community elders with municipal power to enforce redress will ensure that contracts on settlements are honored once the young person has served as agreed. But most acknowledge that formalizing the process with written contracts and bringing governments onboard will distort the natural equilibrium where people derive pride that they helped to uplift younger people.
There are many lessons for the world from the IAS system that could elicit new changes in the contemporary capitalist system. IAS improves competition by making it possible to bring new players in a sector, benefiting customers. It brings a new mindset on value creation, going beyond financials to include sustaining communities and families. More so, it creates wealth for everyone. Largely, the Igbo apprenticeship system is a practical demonstration of the ubuntu philosophy — “the belief in a universal bond of sharing that connects all humanity.” It may not be scored high when benchmarked on some Western business and economic frameworks, but for the Igbos and some Africans, it is a working system which has brought equality and peaceful coexistence in communities, making sure that no one leaves his or her brethren behind. Those are the evidential ideals of stakeholder capitalism.